April 28, 2003

By: Joseph Sanscrainte, General Counsel
Call Compliance, Inc.
jws@callcompliance.com

Federal DNC:  Harmonization or Cacophony?

With the creation of a federally administered "national" Do Not Call ("DNC") regime now a reality, telemarketers are facing yet another set of challenges and uncertainties.  Despite the initial hope that a federal program would alleviate at least some of the complexities associated with state-by-state DNC compliance, many in the industry are questioning whether a federal level DNC list may in fact have just the opposite effect. 

Though the FTC has made repeated assurances with regard to the "harmonization" of the Federal list with the state lists, the question facing the teleservices industry today is:  has the regulatory storm passed, or is this just the eye of the hurricane?

Talk to 10 different telemarketers, or state regulators for that matter, and you will receive 10 different versions as to what exactly harmonization means and how it will be accomplished.

The FTC's version is as follows:  "[T]he Commission does not intend . . . to preempt state "do-not-call" laws.  Rather, the Commission's intent is to work with those states that have enacted "do-not-call" registry laws . . . during what it anticipates will be a relatively short transition period leading to one harmonized "do-not-call" registry system and a single set of compliance obligations. . . . The Commission's goal is . . . a system whereby consumers, in a single transaction, can register their requests not to receive calls . . ., and sellers and telemarketers can obtain a single list . . . ."  (From the FTC's Statement of Basis and Purpose supporting its revisions to the TSR.)

FTC Chairman Tim Muris' comments offer additional insight into the FTC's harmonization plans.  In his appearance January 8, 2003, before the House Energy and Commerce Committee, Mr. Muris stated that there was "overwhelming support in the states for uniformity" and that the "transition" period [during which telemarketers would have to pay fees both to the states and the FTC] would last only up to a year and a half.

Clearly, the FTC's plan is to accomplish more than simply achieve parity of DNC data between the states and the FTC.  For a single, cohesive DNC program to become a reality, the list data itself, the consumer registration procedures, the telemarketer registration procedures, and the enforcement/exemption rules will all need to be transitioned away from the states to the FTC.  In other words, it seems that the FTC plans to obviate the need to actively pre-empt state DNC rules by working with the states to render the state programs obsolete within 18 months. 

Harmonization and the States.  The promise of "one-stop shopping" for DNC information, however, based upon early returns, does not appear to be on the horizon.  When this article went to press, 25 states had "live" DNC programs.  None of these  states has indicated that they plan to discontinue their DNC programs, and only Minnesota has incorporated any language that would remove the need to apply for and obtain both the federal and state list.

Arkansas and Colorado will incorporate the federal DNC information to their state lists, and vice versa; Massachusetts and Tennessee plan only to incorporate the federal information into their state lists.

Of the 7 "pending" state DNC lists, California, Michigan, and New Mexico opted  simply to use the Federal list; Utah and Mississippi are going to create separate state DNC programs (although Utah offers safe harbor protection if a telemarketer complies with the federal list) and Illinois and South Dakota have yet to determine whether they will opt for the federal program or create their own.

At least 9 states have introduced bills this session to create state-run DNC programs.  Arizona and Maryland indicate they will incorporate federal information into their state lists, and vice versa.  Montana indicates it will incorporate federal information to its state list (but not vice versa).  Ohio and South Carolina plan to add state information to the federal list; and the rest -- Hawaii, Virginia, Washington, and West Virginia -- make no mention of the federal level program whatsoever.  Also, Oklahoma and New Hampshire have bills pending to opt for the Federal program.

Rather than overwhelming support, many telemarketers think that the above information points to, at best, ambivalence toward the federal DNC program.  The states appear to think that harmonizing is just another word for information swapping between the states and the FTC; the FTC appears to have something more all-encompassing in mind. 

It is important to note, however, that the FTC's harmonization plan is scheduled to take up to 18 months following launch of the list.  The FTC suggests that consumers check the do-not-call Web site for updates on this at www.ftc.gov/donotcall.

Outcomes.  If all goes according to FTC plan, sometime around March 1, 2005, there will be one federal-level DNC program, synchronized between the FTC and the Federal Communications Commission.  Through it, consumers and telemarketers will have access to a virtual DNC superstore.  There will be no need for consumers to sign up for, and no need for telemarketers to register and pay for, any state list.

Moreover, the state programs will have altered their laws so as to be in "harmony" with the federal rules.  The 18-month transition period will be simply an ever-receding blip on the nation's regulatory radar screen, having caused no confusion for consumers, no data transfer problems between the states and the FTC, and no hue and cry from telemarketers.

What if things do not go according to plan, however?  For many in the industry, the 18-month transition envisioned by the FTC is itself unpalatable - anything that delays this conversion will only add to telemarketers' frustrations.  Every industry observer recognizes that a concurrent federal/state regulatory scheme -- with conflicting rules, definitions, and exemptions -- would be a regulatory morass for everyone involved.  If the FTC/FCC list does not end up being the DNC trump card it was advertised to be, it is telemarketers who will have to work out the resulting complexities.

The sharing of DNC data between the states and the federal programs offers other concerns.  Sharing of data, combined with differing exemption sets, makes it possible that every state list and the federal list will consist of two sets of individuals - those who signed up for the state program, and those who signed up for the federal - each requiring different compliance standards.

Moreover, the ability of telemarketers to comply with any DNC list depends on the accuracy of the DNC data itself.  Should the data exchange between the states and the FTC become an ongoing occurrence, minor data processing problems could turn into nationwide DNC compliance breakdowns.

The next few months will reveal whether these questions will be addressed in accordance with the FTC's plans, or if telemarketers will have to face an exponentially more difficult compliance task.